McKesson and Change Healthcare to Form New Healthcare Information Technology Company
New entity to combine majority of McKesson Technology Solutions and Change Healthcare into separate company positioned to address the healthcare industry’s emerging and most pressing challenges.
Transaction to create new company with $3.4 billion in pro forma combined total annual revenues for the fiscal year ended March 31, 2016.
Brings together broad portfolio of complementary capabilities to deliver wide-ranging financial, operational and clinical benefits to payers, providers, and consumers.
McKesson and Change Healthcare will own approximately 70% and 30%, respectively, of the new company and will receive cash proceeds of approximately $1.25 billion and $1.75 billion, respectively, following the close of the transaction.
The new company will be jointly governed by McKesson and Change Healthcare and is expected to generate in excess of $150 million in annual synergies by the second year following the close of the transaction.
"The combination of these two entities comes at a transformational time in U.S. healthcare"
SAN FRANCISCO & NASHVILLE, Tenn.--(BUSINESS WIRE)--McKesson Corporation (NYSE:MCK), a leading global healthcare services
and information technology company, and Change Healthcare Holdings,
Inc., a leading provider of software and analytics, network solutions
and technology-enabled services, today announced the creation of a new
healthcare information technology company. The entity will combine
substantially all of Change Healthcare’s business and the majority of
McKesson Technology Solutions (MTS) into a new company with fiscal year
end March 31, 2016 pro forma combined total annual revenues of $3.4
The new organization brings together the complementary strengths of MTS
and Change Healthcare to deliver a broad portfolio of solutions that
will help lower healthcare costs, improve patient access and outcomes,
and make it simpler for payers, providers, and consumers to manage the
transition to value-based care. As a separate entity singularly focused
on healthcare technology and technology-enabled services, the new
organization will be positioned to better respond to customer needs and
deliver next-generation innovations.
McKesson has scheduled a conference call for today June 28, 2016, at
8:45 AM ET, to discuss the transaction. Details for the conference call
are included later in this press release. For more information on the
transaction, visit http://www.healthtechtransformation.com.
“This is a bold, innovative transaction that creates a company with an
enhanced ability to help customers address their increasingly complex
financial and clinical challenges,” said John H. Hammergren, chairman
and chief executive officer, McKesson Corporation. “The new company will
establish a more efficient suite of end-to-end payment and claims
solutions, as well as clinical capabilities, while unlocking the value
of our MTS businesses in a tax-efficient manner. We look forward to
partnering with Change Healthcare’s management team and employees to
create this new enterprise and to help customers reduce complexity,
lower costs and ultimately provide better care.”
“The combination of these two entities comes at a transformational time
in U.S. healthcare,” commented Neil de Crescenzo, president and chief
executive officer, Change Healthcare. “Together we will create
significant value by bringing together complementary capabilities from
both organizations to deliver innovative new solutions for customers,
create opportunities for team members at a leading healthcare technology
company, and drive advancements that address the three critical areas of
cost, quality and outcomes across the healthcare sector.”
The new company will be able to offer health plans and providers a
comprehensive suite of end-to-end financial and payment solutions and
technologies. In addition, customers will benefit from solutions that
help them manage administrative and clinical complexity as they navigate
the transition to value-based care. Patients will have better tools that
allow them to make more informed decisions, helping them maximize their
healthcare dollars and receive high quality care.
“We are extremely pleased to be part of this important new company,"
said Neil P. Simpkins, senior managing director of Blackstone. “The
innovative track records and forward-thinking experiences of both
organizations create a truly unique opportunity for positive impact
across the healthcare ecosystem.”
Transaction Terms and Structure
Under the terms of our agreement, McKesson will contribute the majority
of its McKesson Technology Solutions businesses to the new company, with
the exception of RelayHealth Pharmacy and its Enterprise Information
Solutions (EIS) division, which will be retained by McKesson. McKesson
separately announced today that it will explore strategic alternatives
for its EIS division.
Change Healthcare will contribute all of its businesses to the new
company, with the exception of its pharmacy switch and prescription
routing business, which will be owned separately by the current Change
Healthcare stockholders. Change Healthcare is currently majority-owned
McKesson will own approximately 70% of the new company, with the
remaining equity stake held by Change Healthcare stockholders, which
includes Blackstone and Hellman & Friedman. McKesson and Change
Healthcare stockholders will jointly govern the new company and John H.
Hammergren will serve as chairman. Neil de Crescenzo will serve as chief
executive officer, joined by an experienced management team comprised of
leaders from both McKesson and Change Healthcare.
The transaction unlocks value for McKesson and Change Healthcare
stockholders by creating a new company with a singular focus on
healthcare technology and technology-enabled services, and is expected
to generate in excess of $150 million in annual synergies by the second
year following the close of the transaction.
The new company has received commitments for $6.1 billion of funded debt
related to this transaction, with proceeds to be used to repay
approximately $2.7 billion of existing Change Healthcare debt, make
$1.25 billion in cash payments to McKesson and make $1.75 billion in
cash payments to Change Healthcare’s stockholders, with the remainder to
be used for transaction-related expenses.
The transaction is subject to closing conditions, including antitrust
clearance and the completion of audited financial statements of the MTS
businesses being contributed to the new company, and is expected to
close in the first half of calendar year 2017. The agreement provides
that McKesson and Change Healthcare will take steps to launch an initial
public offering in the months following the close of the transaction,
subject to market conditions. Thereafter, McKesson expects to exit its
investment in the new company in a tax-efficient manner.
Conference Call Details
McKesson has scheduled a conference call for today June 28, 2016, at
8:45 AM ET to discuss the transaction. The dial-in number for
individuals wishing to participate on the call is 719-234-7317. Craig
Mercer, senior vice president, Investor Relations, McKesson Corporation,
is the leader of the call and the password to join the call is
‘McKesson’. The live webcast and supplementary slide presentation for
the conference call can be accessed on the company’s Investor Relations
website at http://investor.mckesson.com.
A telephonic replay of this conference call will be available for five
calendar days. The dial-in number for individuals wishing to listen to
the replay is 719-457-0820 and the pass code is 2040084.
About McKesson Corporation
McKesson Corporation, currently ranked 5th on the FORTUNE 500, is a
healthcare services and information technology company dedicated to
making the business of healthcare run better. McKesson partners with
payers, hospitals, physician offices, pharmacies, pharmaceutical
companies, and others across the spectrum of care to build healthier
organizations that deliver better care to patients in every setting.
McKesson helps its customers improve their financial, operational, and
clinical performance with solutions that include pharmaceutical and
medical-surgical supply management, healthcare information technology,
and business and clinical services. For more information, visit www.mckesson.com.
About Change Healthcare
Change Healthcare is a leading provider of software and analytics,
network solutions and technology-enabled services that optimize
communications, payments and actionable insights designed to enable
smarter healthcare. By leveraging its Intelligent Healthcare Network™,
which includes the single largest financial and administrative network
in the United States healthcare system, payers, providers and pharmacies
are able to increase revenue, improve efficiency, reduce costs, increase
cash flow and more effectively manage complex workflows. Learn more at www.changehealthcare.com.
Blackstone has been a global leader in private equity since 1985, with
$95 billion of assets under management. Blackstone uncovers value by
identifying great companies and enhancing their performance by providing
strategic capital and outstanding management talent. Blackstone aims to
grow stronger enterprises, create jobs, and enable its portfolio
companies to build lasting value for its investors, their employees and
Blackstone is one of the world’s leading investment firms. It seeks to
create positive economic impact and long-term value for its investors,
the companies it invests in, and the communities in which it works. This
is done by using extraordinary people and flexible capital to help
companies solve problems. Its asset management businesses, with over
$340 billion in assets under management, include investment vehicles
focused on private equity, real estate, public debt and equity,
non-investment grade credit, real assets and secondary funds, all on a
global basis. Further information is available at www.blackstone.com.
Follow Blackstone on Twitter @Blackstone.
This press release includes “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, as amended, that are subject to
risks, uncertainties and other factors. All statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including statements regarding the expected
timing of the completion of the transaction; the ability to complete the
transaction considering the various closing conditions; the expected
benefits and costs of the transaction; any projections of earnings,
revenues, synergies or other financial items; any statements of the
plans, strategies and objectives of management for future operations;
any statements regarding product or service developments, extensions or
integration; any statements of expectation or belief; any statements
regarding general industry conditions and competition; any statements
regarding economic conditions; and any statements of assumptions
underlying any of the foregoing. Risks, uncertainties and assumptions
include risks related to the timing or ultimate completion of the
transaction, as the transaction is subject to closing conditions,
including antitrust clearance and completion of audited financial
statements of the MTS businesses being contributed to the new company;
the possibility that expected benefits may not materialize as expected;
ability to successfully implement integration strategy for the new
company; as well as the ability to ensure continued performance or
market growth of McKesson’s, Change Healthcare’s and the new company’s
products and services. These risks, uncertainties and other factors, and
the general risks associated with the respective businesses of McKesson
and Change Healthcare described in the reports and other documents
submitted by each of them to the Securities and Exchange Commission,
could cause actual results to differ materially from those referred to
in the forward-looking statements. All forward-looking statements are
based on information currently available to McKesson and Change
Healthcare and are qualified in their entirety by this cautionary
statement. You are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date such
statements were first made. Except to the extent required by law,
neither McKesson nor Change Healthcare assumes any obligation to update
any such forward-looking statements or other statements included in this